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Could rental houses owned and managed by hedge funds and big investors be the post-bust
steppingstones to homeownership for huge numbers of renters?

Could they also provide a sanctuary for thousands of families who were displaced through
foreclosures or short sales?

A new national study suggests that the answer to both questions is yes.

During the past five years, according to Wall Street analysts’ estimates, $7 billion to $9
billion worth of distressed single-family homes have been purchased and converted to rentals by
institutional investors — hedge funds, private partnerships of individuals and even pools of
capital raised among foreign investors.

Unlike traditional rental-home investors, these funds have been scooping up dozens, sometimes
hundreds, of properties at a time through cash purchases of foreclosures, short sales and bulk
acquisitions from lenders.

The involvement of large-scale institutional investors is causing the category of single-family
rental homes to explode. Roughly 52 percent of all rental units in the country are now
single-family homes and house 27 percent of all renters, according to a new study conducted by
pollster ORC International for Premier Property Management Group, which works with investors.

Recent census data cited in the study indicate that the number of single-family rentals grew by
21 percent between 2005 and 2010 — from the top of the boom through the depths of the bust —
compared with a 4 percent increase in total housing units.

These mass conversions — according to Mark Fleming, chief economist for CoreLogic, a mortgage
and real-estate research firm — are contributing to the declines in the number of homes for sale in
markets where foreclosure rates were most pronounced during the bust.

But the ORC-Premier study suggests that the new wave of single-family rentals might be providing
a pathway to homeownership. Sixty percent of rental-home tenants say they plan to buy a house in
the next five years, compared with 44 percent of renters in multifamily apartment buildings.

Bottom line: Single-family rentals are likely to remain a growing factor in the housing market,
but they might — at least temporarily — depress the national homeownership rate — which stands at
about 65 percent, down from 69 percent during the boom.